Why do I need a Reserve Fund Plan?
A Designated Strata Company must prepare a 10 year Reserve Fund Plan (to be reviewed every 5 years) as required by the new Strata Titles Act 1985 (see section 102 below). This enables the Strata Company to plan for the cost of maintaining common property in their Strata Scheme by raising appropriate reserve funds to cover necessary expenditure.
section 102. Budget(1) A strata company must prepare a budget for each financial year and submit it for approval to its annual general meeting.
(2) The budget must be prepared ‐
(a) taking into account, if applicable, the 10 year plan for the reserve fund; and
(b) in accordance with any requirements set out in the regulations and the scheme by‐laws.
Reserve Fund Plans
OUR 10 YEAR PLANS ARE COMPLIANT. We specialise in and are passionate about providing 10 Year Reserve Fund Plans which are compliant with s100(2A) of the new Strata Titles Act 1985.
Our Reserve Fund Plans are practical and are set out in:
- Easy To Read Reports
- Strata Company obligations
- 10 Year Reserve Fund Plans are required by legislation and are to be reviewed at least each five years.
The purpose of a Reserve Fund Plan is to determine the amount to be set aside each year to meet non-routine expenses of a capital nature. These include the replacement, renewal, or repair of both minor and major capital items such as windows, fencing, concrete paths, carpeting, common property lighting, painting of buildings, amongst many other things.
The benefit of obtaining a Reserve Fund Plan is to provide for a pool of funds to be easily applied to maintain the appearance and the quality of the improvements contained within the strata scheme, and thereby assisting the Strata Company to meet their legal obligations.
Duty to repair and maintain common property
There is a Duty of Care for the Strata Company to repair and maintain common property, and in particular to ensure that the common property is safe for the owners and their visitors. (See s91 of the new Strata Titles Act 1985 below).
91. General duty (1) A strata company must -[(a) deleted]
(b) control and manage the common property for the benefit of all the owners of lots; and
(c) keep in good and serviceable repair, properly maintain and, if necessary, renew and replace -
(i) the common property, including the fittings, fixtures and lifts used in connection with the common property; and
(ii) any personal property owned by the strata company, and to do so whether damage or deterioration arises from fair wear and tear, inherent defect or any other cause.
In addition, there is the Common Law Duty of Care to all visitors and owners to ensure that the property is safe for any person. These provisions are usually set out under the Civil Liability Act 2002.
Ordering a Reserve Fund Plan
Once we receive an order for a Reserve Fund Plan we will
- inspect the subject property and identify likely items requiring repair, renewal, replacement or maintenance within and beyond 10 years.
- provide the Strata Company with the opportunity to include additional items that they would like. For example, earlier renewal of landscaping, upgrading of any other common areas such as building a BBQ area, or kids playground or gym.
- Analyse, prepare and issue the 10 year Reserve Fund Plan with the recommended capital works or reserve fund amount to be set aside each year, the total amount to be expended throughout the 10 year term, including an allowance for the escalation of construction costs, and the likely time frame for the repair, maintenance, renewal or replacement of each item.
- take photos of relevant replacement or maintenance items.
- ensure that the 10 year Reserve Fund Plan will be carried out by a Valuer without limitation.
Reviews - Best approach
- Recommend a review within 5 years from the date of the last plan, or the date of the required compliance
- Obtain a new report with a new site inspection
- Consider any variation to the existing annual reserve fund contributions
- It is similar to reviewing a budget to adjust and fine tune the savings for the Strata Company
Points of consideration
- Independent unbiased advice
- Avoid unnecessary Special Levies
- User pays
- A fairer system
- Adds value - building well maintained and large Reserve Fund balance
- Legal requirement to maintain common property
- Good practice
- Saves owners and strata managers time
- Professionally carried out
- Risk Transfer - we have $10M Professional Indemnity insurance for the Reserve Fund Plan
- Addresses latent and unforseen costs
Goal of a Reserve Fund Plan
- To simply determine the amount to be set aside each year
What a Reserve Fund Plan is NOT
- Not a detailed quote for every single item, for replacement, renewal or repair
- Not a highly accurate assessment for the cost and time frame as costs may vary in the future
- Not a Dilapidation Report nor includes climbing onto a roof, nor under building sub floor areas
- Not a Maintenance Schedule for each specialised item within the Strata Scheme ie lifts, fire services, common air conditioning, etc
- Not an opportunity for the owners to get free building, engineering, fire or safety advice
Final points to consider
- Legislation: strict duty to repair and maintain common property
- Aging population on fixed incomes
- No ability to comply without adequate funds
- Potential increase in safety and litigation issues (and potentially no insurance)
- Resistance to set money aside may present a difficult management situation
Risk Management
Appropriate reserve funding will prevent the Strata Company from breaching their strict statutory obligation to repair and maintain common property, and prevent the owners from incurring unnecessary costs and penalties as occurred in ‘Seiwa Australia Pty limited v Owners SP35042 [2006] NSWSC 1157’ and ‘Nicita v Owners SP64837 [2010] NSWSC 68’.
Further Services
In addition to carrying out Reserve Fund Plans, we also carry out Building Insurance Valuations, and assess and prepare Asbestos Registers and Asbestos Management Plans, Work Health and Safety Reports including 'Common Law Duty of Care' Reports (WH&S and OH&S).
Turnaround time and fees
Our normal turnaround time is around 3 to 7 business days, and we will beat any competitors written quote by 12%.